- The Compound DAO voted against reclaiming about $13 million worth of tokens from selected delegates.
- Almost 70% of the voting tokens supported keeping the allocated funds with the original recipients.
- The disputed tokens were distributed in August 2024 as part of a Delegate Race program to encourage governance participation.
- Critics argued the allocation favored insiders and did not align with DAO principles linking governance power to economic risk.
- Some participants believe the allocation prevents protocol takeover by large token holders, also known as “whales.”
The Compound DAO, which manages the $4 billion Compound lending protocol, has decided not to reclaim about $13 million in tokens distributed to certain DAO delegates. The vote was held on Tuesday, and the majority opposed a proposal to recover tokens given out under the Delegate Race incentive plan.
The allocation of 300,000 Compound tokens originated from Compound’s treasury in August 2024. According to onchain voting data from Tally, nearly 70% of voters rejected the proposed clawback, with support for the proposal mainly coming from large stakeholders like the pseudonymous Humpy, who reportedly controls more than $3 million worth of Compound tokens.
Supporters of the proposal believed the token distribution only benefited a handful of insiders and went against the DAO’s goal of tying governance power to actual financial commitment. The proposal’s author stated on the DAO forum, “DAO governance is built on a simple principle: power must be correlated with actual economic risk-taking [via] buying the underlying token. The Delegate Race distorts this principle: it grants political power financed by the treasury, without being earned through capital commitment.”
On the other hand, some DAO delegates argued that keeping the tokens with delegates serves as a safeguard against so-called “DAO capture.” This term refers to a scenario where one or a few large holders, known as “whales,” accumulate enough tokens to control governance votes, similar to a 51% attack in blockchain networks.
There has been previous tension between Humpy and the Compound DAO. In July 2024, a group called Goldenboys, including Humpy, secured $25 million worth of Compound tokens through a DAO vote. Later, the DAO reversed the execution of this decision in exchange for introducing a staking program benefitting major token holders.
Some voting participants, like PGov and Arana Digital, who gained from the Delegate Race program, also voted against reclaiming the tokens. Several delegates declined to comment publicly on the outcome. More background on Compound and its governance process can be found through DefiLlama and the latest governance vote records.
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